David Smith ties himself in all sorts of knots in yesterday's Sunday Times (£). He quotes me as saying: “Our historically very low level of interest rates is — just as in Japan — a sign of economic failure, not success. ” David says: " I find this puzzling...We should celebrate the fact that borrowing costs are so low. "
Update 24 January, 10 am. David responds here. And it's revealing. In his original post, he said "low gilt yields, currently around 2% for the benchmark 10-year bond, are testimony to market confidence. In his second, he agrees that low gilt yields reflect the fact that the markets "expect Bank rate to stay low." But he then argues "I'm not at all sure this is a sign of economic failure, merely a reflection of banking and financial conditions. Sir Mervyn King has made clear that a key factor keeping rates low is the health (or lack of it) of the banking system."